Brazil PMI

The Markit manufacturing Purchasing Managers’ Index (PMI) gained back some lost ground in December, rising from November’s 43.8 to 45.6. November’s result had marked the worst reading in almost seven years. Despite the improvement, the PMI remains below the 50-threshold that separates contraction from expansion in business conditions in the manufacturing sector. Brazil’s economy has been plagued with a slew of bad economic data in the past months that suggest the economy’s deep recession shows no signs of abating.

According to Markit, December’s figure came on the back of slower, albeit still sharp, contractions in output and new orders. The country’s current economic crisis was evident among survey participants, as employment, buying levels and stocks all declined. On the bright side, new orders from abroad increased, likely supported by a weaker real. Markit analysts added that, “with the country bombarded with bad news, ranging from a depreciating currency, credit rating downgrades, political frictions, skyrocketing inflation, arrests following the Petrobras probe and a growing budget deficit, there is little to suggest any improvement in economic conditions in the near future, and 2016 looks set to be another year of great challenges.”

Retail sales (excluding cars and construction) fell 1.5% from the previous month in seasonally-adjusted terms in December, which contrasted November’s revised 1.0% increase (previously reported: +0.7% month-on-month).
Declines were seen nearly across the board, with only two of the eight components of the index seen growth in sales.

At its 7 February meeting, the Central Bank of Brazil’s Monetary Policy Committee (Comité de Politica Monetaria, COPOM) decided to cut the benchmark SELIC interest rate by 25 basis points, a smaller cut than the 50 basis-point reduction it made at the previous meeting.